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TMI Blog2013 (4) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... and chemicals. Since both the appeals arise from the order of ld. CIT(A) dated 6.9.2008, they are taken up together for the sake of convenience. Revenue's appeal 4. The only ground involved in this appeal is about addition of Rs.83,78,699/- on account of bogus purchases. During the course of assessment proceedings the AO observed that assessee had shown purchases of colour and chemicals from Shri Rohit Panwala, Prop. Of Pooja Dye Chem and five other persons through their 12 different proprietorship concerns from different addresses. The ACIT, Cir.4 examined Shri Rohit Panwala and during examination Shri Panwala had filed affidavit before him admitting that all the 12 bank accounts were operated by him and that all other persons were only name lenders. The assessee had shown purchases of colour and chemicals from the following persons belonging to Shri Rohit Panwala as under :- Sl.No. Name of the party from whom materials purchased Amount of purchase 1. M/s Nalanda Corporation 15,50,254 2 M/s Pooja Dye Chem 17,99,215 3 M/s Sandhya Trading Co. 10,31,725 4 M/s Neha Synthetics 20,05,610 5 M/s Punit Corporation 19,91,895 Total 83,78,699 5. The assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of aforesaid purchases." 7. The AO, however, did not accept the reply and proposed the addition of sum of Rs.83,78,699/- for the following reasons :- (1) Shri Rohit Panwala is only engaged in cheque discounting business and not in colour/chemicals. In earlier year also he has been doing the similar business of issuing bogus bills in colour/chemicals and charging commission from 1.5% to 2.5%. (2) He has not supplied any goods as per bills issued by him. Cheques were credited into bank account of bogus concerns. Such amounts were subsequently withdrawn by him in cash and was given back after deducting commission. (3) He has provided a list of 15 processing/dying houses to whom such bogus bills were given. (4) The assessee has failed to produce any evidence like transportation receipt, stock registers etc. to substantiate the claim of the purchases. 8. When the matter came before the ld. CIT(A) he partly deleted the addition and retained 25% of the same on the basis of decision in the case of M/s Vijay Proteins [55 TTJ 76]. In this regard ld. CIT(A) observed as under :- "I have considered the submissions and gone through the details filed by the appellant. It is see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by cheques and credited into the accounts of the sellers. 10. Before us, the ld. AR for the assessee submitted that (1) the statement of Shri Rohit Panwala has been recorded at his back and no opportunity has been given to cross examine inspite of assessing asking for it. (2) Goods have actually been received and consumed in the business. (3) There is no evidence that cash was received back by the assessee. It is only the presumption raised by the Revenue. (4) Above purchases are proved by proper bills whose copies were submitted to the AO. (5) Similar additions were made in the case of other assessees on the basis of statement of Shri Rohit Panwala which have been deleted by the Tribunal. In the case of M/s Akruti Dyeing & Printing Mills (P) Ltd. vs. ACIT in ITA No.2551/Ahd/2006 and DCIT vs. M/s Akruti Dyeing & Printing Mills (P) Ltd. in ITA No.2752/Ahd/2006 the addition made on the basis of statement of Shri Rohit Panwala were deleted by the Tribunal as under :- "20. Having heard the rival submissions and perused the orders of the lower authorities and the materials available on record we find that a search operation was carried out on Shri Rohit Panwala and his associates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions and perused the orders of the lower authorities and the materials availably on record we find that a search operation was carried out on Shri Rohit Panwala and his associates and other proceedings were also taken against them wherein Shri Rohit Panwala stated that he used to provide accommodation/fake bills at the request of the parties. On the basis of this, the AO has treated the purchases made by the assessee from 3 parties which do not include Rohit Panwala for Rs.7,2I,950/- as bogus. The assessee claimed that the payments to the parties were made by account payee cheques and against receipt of goods. We find that the Revenue has brought no material on record to show that the purchases shown by the assessee from the aforesaid 3 parties were not genuine and where accommodation/fake bills shown by the assessee. No statement recorded from the above 3 parties by the Revenue were brought on record. We find no material on the basis of which it can be alleged that the above parties admitted that the bills raised by them against the assessee were merely accommodation bills. In the above circumstances the disallowance made by the Revenue on the basis of surmises and conjectures wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the ld. AR submitted that books have been rejected even though it has not been done so by the AO. No addition on account of GP rate made because assessee has shown higher GP rate of 8.66% this year as compared to immediately preceding year. 11. Against this the ld. DR submitted that there is no evidence that goods were actually transported to the premises of the assessee and there is no evidence that goods were actually consumed by the assessee. The evidence in the form of entry at the gate by the assessee is only a selfserving evidence created to show genuineness of the purchases. (2) Since assessee has claimed purchases then it is for the assessee to prove such purchases by producing the parties before the AO and the onus cannot be shifted to the Revenue. (3) Assessee has not shown in consumption register and no comparative chart as to the consumption of colour and chemicals in the current year or in earlier years. (4) If turnover of the assessee is about 15 crores then consumption of chemicals comes by 5 - 6% which is excessively high. So far as crossexamination of Rohit Panwala is concerned AO had made attempts to summon Rohit Panwala but he did not attend the proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 345 (Del) has held that where assessee has requested for permission to cross-examine a person searched and such crossexamination was not allowed then order of assessment will not be valid. In this regard we refer to the following head notes from that decision:- "A search was carried out in the premises of one MA, a director of a company. On the basis of the documents discovered and the statements of MA, a block assessment was made in respect of MA and the company on August 29, 2002, under the provisions of section 158BC of the Income-tax Act, 1961. Subsequently, block assessment proceedings were initiated against the assessee and completed on November 28, 2004, under the provisions of section 158BD of the Act. During the assessment proceedings, the assessee requested the Assessing Officer time and again to permit it to cross-examine MA on the basis of whose statement proceedings had been launched and from whose possession the documents were recovered, so that the assessee could prove its case. The request was not acceded to by the Assessing Officer. The Tribunal held that the Assessing Officer was functioning as a quasi-judicial authority and was under an obligation to adhere to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that all the concerns from whom assessee has shown to have made purchases of colour and chemicals are owned by different persons. It was incumbent on the AO to call these persons or prove that they were nonexistent. If there are some existing owners of these concerns then their statements should have been recorded and these persons should have also been offered for cross-examination. The statement of any other person claiming to be the owner of these concerns applying to the facts of assessee's case cannot be blindly relied upon without confronting the ostensible owner. Since no enquiry/investigation has been carried out into the existence of ostensible owner the reliance of the AO merely on the statement of Rohit Panwala is vitiated. 17. Even on facts, it is not established that assessee does not require colour /chemicals to the extent it has shown to be consumed. No technical or comparative data is brought into record to show that assessee in fact did not require colour and chemicals to the extent it has shown the purchases and, therefore, there is no persuasive span in the argument that these purchases are bogus. 18. We also notice that this assessee has been showing purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bills, the suppliers may be willing to sell those products at a much lower rate as compared to the rate which they may charge in case the dealer has to give a genuine sale invoice in respect of that sale and supply the goods. There may be various factors due to which there is bound to be a substantial difference between the purchase price of unaccounted material and rate of purchase of accounted for goods. There may be a saving on account of sales tax and other taxes and duties which may be leviable in respect of manufacture or sale of goods in question. The suppliers or the manufacturers make a substantial saving in the income tax in respect of income from sale of unaccounted goods produced and sold by them. This may also be one of the factors due to which the seller may be willing to charge lower rates for unaccounted goods as compared to accounted for goods. Keeping all these factors in mind and also keeping in view the decision of the ITAT in the case of Sanjay Oil Cake Industries (supra) we hold that 25% of the purchase price accounted for in the books of accounts through such fictitious invoices in the name of 33 bogus parties should be disallowed out of the amount of purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the ld. AR which has also been practically affirmed by Hon. Gujarat High Court as referred to above. Then there is no reason to make any addition in the case of the present assessee solely on the ground of statement of Rohit Panwala. Similar view has been taken by the Tribunal in other three cases as referred to above. 21. Merely on the strength of statement of Rohit Panwala it cannot be held that purchases are bogus. The decision of Hon. Gujarat High Court in ACIT vs. M. K. Bros. (supra) is relevant to the point as under :- "During the accounting year relating to assessment year 1971-72, the assessee had made purchases of the total value of Rs. 52,254 from certain parties. The Income-tax Officer required the assessee to produce evidence regarding the purchases. In the meantime, the said parties had admitted to the sales tax authorities that they had issued bogus vouchers. The Income-tax Officer held that the purchases were not genuine and assessed the amount of Rs. 52,254 as income of the assessee from undisclosed sources. The Tribunal found that there was no evidence to show that bogus vouchers had been issued to the assessee, that nothing had been shown to indicate that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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